UK tax on US shares

[markyoung1984 (Mark Young)]

I have investments in several US companies from my UK Freetrade account. I went through the W8-BEN process via the app when buying my first US stock.

I know the W8-BEN sorts out the US tax side of things, but not sure about UK tax on such shares? From reading I can see that Stamp Duty Reserve Tax (SDRT) is paid automatically on UK shares, but do I need to pay anything to HMRC like SDRT for US shares?

I just want to get my tax affairs in order so I don’t receive any penalties further down the line. Additionally, do I need to “renew” or fill out again the W8-BEN in the US at any point?

Thanks.

[rivorson]

There’s no stamp duty on US assets. The W8-BEN reduces the amount of US withholding tax from 30% to 15%. You only need to complete it once, though if your US citizenship status changes in the future you will need to inform every broker through which you have completed the form.

You still need to pay UK dividend and capital gains taxes on US stocks if you go over the allowances, which are currently £2,000 and £12,300 respectively. You can avoid these taxes by holding the shares in an ISA.
You usually don’t need to report your capital gains and dividends if they are below the allowances but there is an exception if the total amount of share sales is more than four times the allowance even if your total gains are within the allowance.
@Conladx gave a good example of how this works here:

Can Capital gain tax sneakily add up?

Unfortunately capital gains tax is not as simple if you’ve made hundreds of transactions outside of your general account. - I do to and I have a google spreadsheet tracking everything up! Note that this is general advice and I’m just doing some illustrations to show the complexities of apply the rules. You should get independent tax advice if you need to! 1. ISA is non-taxable As you’ve said, your investments is in a general account (i.e. Non-ISA), because any profits / dividends is tax free …

The government guidelines on reporting and paying capital gains and dividend taxes are here:

Tax when you sell shares

Tax on dividends

[Dave (Dave Smith)]

@rivorson

The W8-BEN reduces the amount of US withholding tax from 30% to 15%. You only need to complete it once,

W8-BEN expires after three years, so you do need to renew it

[rivorson]

I stand corrected. Thanks, I didn’t know that.

[Groovy57 (Garry Young)]

Be aware that on some high dividend yield US stocks there is no reduction in US tax and the tax is US withholding tax can be up to 33%. I found out to my cost on Enterprise Product Partners (EPD) so what appears to be a high yield intially does not look so attractive when you tale one third off ! There are others too so it pays to check out each position before investing.

[jgt]

Interesting. Is there any particular characteristic of the equity that causes that?

[Groovy57 (Garry Young)]

I’m not sure. There are others where the Tax charge is 25% and that is what you pay as a UK investor . I actually checked the tax on EPD and it is actually 37% !
It is obviously down to the US Tax authorities on an individual basis.

Garry

[SebReitz]

I think it’s linked to its form. LLCs have weird taxation going on as far as I know, which is what most pipeline companies chose, e.g. Enterprise Products or Kinder Morgan.